Audemars Piguet Holding S.A. v. Swiss Watch Int'l, Inc.
| Citation | 46 F.Supp.3d 255 |
| Decision Date | 06 January 2014 |
| Docket Number | No. 12 Civ. 5423HB.,12 Civ. 5423HB. |
| Parties | AUDEMARS PIGUET HOLDING S.A., Audemars Piguet (North America) Inc., Plaintiffs, v. SWISS WATCH INTERNATIONAL, INC. d/b/a Swiss Legend d/b/a SWI Group ; ILS Holdings, LLC d/b/a worldofwatches.com, and Lior Ben–Shmuel, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Milton Springut, Tal S. Benschar, Springut Law PC, New York, NY, for Plaintiffs.
Lisa N. Neal, Rutan & Tucker, Costa Mesa, CA, James Sheinbaum, Borstein & Sheinbaum, New York, NY, for Defendants.
Plaintiffs Audemars Piguet Holding S.A. (“APSA”) and Audemars Piguet (North America) Inc. (“APNA”) (collectively “Plaintiffs”) bring this action against Defendants Swiss Watch International Inc. (“SWI”), ILS Holdings, and Lior Ben–Shmuel (collectively “Defendants”) alleging trade dress infringement under Sections 32(1) and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114(1) & 1125(a), New York common law, and N.Y. Gen, Bus. Law § 360–l . Defendants bring counterclaims for cancellation of Plaintiffs' federal trademark registrations Nos. 2,866,069 and 3,480,826. The Court conducted a four-day bench trial beginning on June 17, 2013 and concluding on June 26, 2013. Below are the Court's findings of fact and conclusions of law as required under Fed.R.Civ.P. 52(a)(1).
Plaintiff APSA, a holding company organized under the laws of Switzerland, owns all trademarks and trade dress rights concerning all Audemars Piguet brand watches. Ex. P101–P104. Plaintiff APNA, a Delaware Corporation, is a licensee of those rights and the exclusive U.S. distributor of all Audemars Piguet brand watches. Id.
Defendant SWI is a Delaware corporation that has acquired all assets of Defendant ILS Holdings through a merger after they were both acquired by Clearlake Capital Group L.P. Tr. 196:12–197:24. SWI operates the website WorldofWatches.com. Tr. 199:3–5. Defendant Lior Ben–Shmuel was a Co–Chief Executive of SWI until recently, when his title became Senior Advisor and Board Member. Tr. 196:5–7; 197:1–12.
In 1972, Plaintiffs introduced the “Royal Oak” line of luxury watches, bearing a design of an octagonal shaped bezel with eight hexagonal screw-heads. Nolot Decl. ¶ 9. A variation of the line bearing the same design elements had been introduced in 1993 as the “Royal Oak Offshore.” Tr. 45:16–18.
APSA owns four trademark registrations for various aspects of the Royal Oak Design. U.S. Trademark Registration No. 2,866,069, registered on July 27, 2004, is for the design of an octagonal bezel with eight screws for watches and other watch-related items. Ex. P–102. U.S. Trademark Registration No. 3,480,826, registered on August 5, 2008, is for an octagonal bezel with eight screws for watches and other jewelry items. Ex. P–101. U.S. Trademark Registration Nos. 4,232,239 and 4,232,240, both issued on October 30, 2012, are for the full design of the Royal Oak watch, respectively with and without a metallic bracelet Exs. P–103, P–104.
Plaintiffs argue that the Royal Oak design does not give Royal Oak watches any competitive advantage over any alternative designs. Nolot Decl. ¶ 39. Royal Oak watches are neither more effective than watches of other designs nor do they have an advantage in terms of utility or manufacturing costs. Id., Indeed, both Defendants and Plaintiffs produce and market watches of other designs. See Ex. P–30, attaching Defendants' catalogue of watches from the 2011 BaselWorld fair. Defendants sell many different watch collections and the allegedly infringing watches make up only 1.5% of Defendants sales. Tr. 270: 13–18. Defendants' own sales substantiate the argument that effective and competitive watches can be made without utilizing the design at issue.
Defendants argue that the octagonal shape is one of the few shapes available for a watch face, and thus is functional.See Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206, 218–19 (2d Cir.2012) ( However, it is not the octagonal shape alone that Plaintiffs seek to protect, it is the trademarked design in its entirety, including the octagonal bezel with eight hexagonal flat screws placed around the bezel. Indeed, Defendants have manufactured another watch with an octagonal face, see Tr. 85:11–25; 86: 7–10, that Plaintiffs do not allege infringes their trademark rights. Based on the evidence presented, I find that Plaintiffs' Royal Oak design is not functional.
The Plaintiffs' least expensive Royal Oak watches start at around $15,000 per watch and escalate to over $1 million. Ex. P–212. From 2010 through the first 11 months of 2012, total sales of Royal Oak watches were in excess of 9,350 units, with revenue in excess of $167 million. Ex. P– 213. Royal Oak watches constitute approximately 75%–80% of Audemars Piguet's U.S. sales. Nolot Decl. ¶ 17; Tr: 42:11–44:23. Audemars Piguet is frequently among the top three watch brands in revenue sold by authorized retailers, behind brands such as Cartier and Rolex. Nolot Decl. ¶ 17.
In the United States, Plaintiffs have advertised Royal Oak watches in widely read newspapers and magazines such as The New York Times, The Wall Street Journal, and Vanity Fair, and in industry magazines, such as WatchTime and W. Nolot Decl. ¶ 22. Ex. P–215; Rule 1006 Summary of P–217 to P–227. Plaintiffs also advertise their brand through sponsorship of charity and recreational events, including the Tony Awards, and yachting and golf tournaments. Nolot Decl. ¶ 28; P–210, P–211, P–228. Plaintiffs have undertaken a number of other advertising and sponsorship endeavors to target high-end consumers. Nolot Decl. ¶¶ 29, 30; see Exs. P–230 through P–235. Between 2010 and 2012, Plaintiffs spent $881,787 promoting Royal Oak watches in American magazines and newspapers. See Ex. P–215.
a. Press Commentary
The Royal Oak watch has been featured in both general media and specialty watch press. See Rule 1006 Summary of P–239 to P–250. One example is a December 2011 New York Times article, placing the Royal Oak on “[t]he list of truly classic watches,” one of a very few “timeless icons of the watchmaker's art,” and comparing it to other well-known watch brands such as Rolex and Cartier. Ex. P–253. Plaintiffs' submissions also include comments from specialty magazines including Wallpaper, WatchTime and Barrons, each of which observe that the Royal Oak is a “classic” or an “icon.” See Rule 1006 Summary of P–239 to P–250 and attachments.
b. Similarity of Third Party Watch Designs to the Royal Oak Design
Defendants have presented evidence of other watch designs that utilize an octagonal shape, some of which also include screws. Tr. 62:10–12; 81:8–9; Ben–Shmuel Decl. ¶ 38; see also Exs. D–104, D–129, D–132, D–130, D–130A, D–131, D–132, D–133. Defendants observe that the Cartier Santos watch includes an octagonal bezel with flat head screws and was sold during the 1980s and 1990s. Tr. 62:13–18; D–17 at 31; D–78. Although the Cartier Santos does resemble the Royal Oak design, in that it includes an octagonal bezel with eight screw heads, no evidence has been submitted regarding when and how many of these watches were sold. While there are other watches that appear to imitate the Royal Oak trade dress—notably Michael Kors and Tommy Hilfiger watches, see Exs. D–130 & D–132—Plaintiffs are addressing these infringements and are in negotiations with both companies. Tr. 176:1–19, 177: 21–178:16. Indeed, at the time of trial, Michael Kors had already withdrawn its inventory of allegedly infringing items. Tr. 176: 1–19. Furthermore, the examples Defendants present do not resemble the Royal Oak design as closely as Defendants' watches at issue here. For example, Defendants point out that their own Octomatic watch, while it utilized an octagonal bezel, was not targeted for trademark infringement by Plaintiffs. See Tr. 85:11–25; 86: 7–10. However, the Octomatic only features an octagonal bezel, and does not include the flat, evenly-spaced screws that the Royal Oak and the Trimix have in common.
Plaintiffs and Defendants both retained experts, each of whom submitted reports considering the extent, if any, of post-sale confusion caused by the similarity of Defendants' Trimix Watches to the Royal Oak design.
Plaintiff's retained Dr. Sidney Lirtzman, President of Fairfield Consulting Associates, a consumer survey consulting company. Dr. Lirtzman conducted a consumer survey and prepared a report based on the survey. The Lirtzman Report was created by intercepting consumers at jewelry and watch stores in New York, Chicago, Los Angeles and Webster, Texas (a suburb of Houston). Lirtzman Report at 4. Shoppers were screened on their eligibility to participate in the study, and were only permitted to participate if they either owned a watch worth at least $15,000 or were “very likely” to consider buying a watch of that value in the next year. Id. at 8. Interviews were conducted by market research workers supplied by four different independent market research fieldwork companies. Id. at 4.
Respondents were shown life size, color photographs of either men's and women's wrists with different watches, including the Swiss Legend Trimix Diver Chronograph Watch or the Swiss Legend Trimix Diver Ladies Watch. Id. at 2–3. They were asked to...
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Audemars Piguet Holding S.A., Audemars Piguet (North America) Inc. v. Swiss Watch Int'l, Inc.
...46 F.Supp.3d 255AUDEMARS PIGUET HOLDING S.A., Audemars Piguet (North America) Inc., Plaintiffs,v.SWISS WATCH INTERNATIONAL, INC. d/b/a Swiss Legend d/b/a SWI Group; ILS Holdings, LLC d/b/a worldofwatches.com, and Lior Ben–Shmuel, Defendants.No. 12 Civ. 5423(HB).United States District Court,......